India Cuts LNG Buying as Other Fuels Become More Attractive

India’s energy landscape is undergoing a profound shift, with the nation strategically reducing its reliance on volatile spot purchases of liquefied natural gas (LNG) while embracing cheaper, more stable alternatives. This transition, driven by long-term contracts, falling renewable energy costs, and the enduring dominance of coal, is reshaping investment opportunities in the region.

The Shift to Long-Term Contracts

India’s LNG imports are projected to grow by 4%–10% in 2025, reaching 28–30 million metric tons, as industrial demand surges. However, the spot LNG market has seen a dramatic decline. By 2025, nearly 6 million metric tons of annual LNG imports are now locked into long-term contracts with suppliers like QatarEnergy, ADNOC, and Total Energies. These deals, priced at 115–121% of the Henry Hub index plus a flat fee, are cheaper than spot LNG’s $14.3/MMBtu forecast for 2025.

This shift reduces exposure to spot market volatility but carries risks. . While term contracts offer stability, traders warn that global LNG oversupply post-2027 could make spot prices cheaper than contracted terms, leaving buyers exposed.

Competing Fuels Gain Traction

Coal remains king in India’s energy mix, supplying 70% of electricity at costs as low as $3–5/MMBtu (domestic) versus LNG’s $14.3/MMBtu. Even as renewables expand, coal’s role is cemented by its affordability and reliability for base-load power.

Renewables, meanwhile, are 22% cheaper than coal-fired power, with solar capacity hitting 102.5 GW by 2025. While intermittent, renewables complement gas by reducing reliance on coal and enabling grid flexibility during peak demand.

Pipeline gas infrastructure is also expanding. Projects like the Urja Ganga Pipeline and Indradhanush Gas Grid are boosting gas access in southern and eastern India, supporting industries like steel and ceramics.

The Impact on LNG Investments

Despite declining spot demand, total LNG imports are rising, fueled by industrial growth and City Gas Distribution (CGD) expansion, which will account for 32% of gas consumption by 2030.

Investors should focus on companies with long-term LNG contracts like GAIL India () and renewable energy players such as Tata Power Renewable Energy. Meanwhile, coal firms like Coal India remain resilient, though ESG pressures may limit their appeal.

Conclusion: A Strategic Balancing Act

India’s energy strategy is a careful dance between growth and affordability. While LNG imports rise, the shift to term contracts and the ascendancy of coal and renewables reflect a maturing market prioritizing stability over spot volatility.

By 2030, LNG demand could hit 37 million mt/year, but investors must navigate risks like global LNG oversupply and domestic gas production declines. The winners will be those aligned with India’s twin goals: securing energy at affordable prices and transitioning toward cleaner, flexible power.

In this landscape, the smart play is to pair exposure to renewables and long-term LNG contracts while keeping a wary eye on coal’s enduring dominance. The era of spot LNG as a go-to fuel is fading—but the broader energy story is far from over.